Using the regression results and the other computations from Assignment 1, determine the market structure in which the low-calorie frozen, microwavable food company operates.

Use the Internet to research two (2) of the leading competitors in the low-calorie frozen, microwavable food industry, and take note of their pricing strategies, profitability, and their relationships within the industry (worldwide).***Banquet & Stouffer's***

1. Outline a plan that will assess the effectiveness of the market structure for the company's operations.Note:In Assignment 1, the assumption was that the market structure [or selling environment] was perfectly competitive and that the equilibrium price was to be determined by setting QD equal to QS. You are now aware of recent changes in the selling environment that suggest an imperfectly competitive market where your firm now has substantial market power in setting its own "optimal" price.

***Previous Assignment***

QD = - 5200 - 42P + 20PX + 5.2I + 0.20A + 0.25M

(2.002) (17.5) (6.2) (2.5) (0.09) (0.21)

R2 = 0.55 n = 26 F = 4.88

Q = Quantity demanded of 3-pack units

P (in cents) = Price of the product = 500 cents per 3-pack unit

PX (in cents) = Price of leading competitor's product = 600 cents per 3-pack unit

I (in dollars) = Per capita income of the standard metropolitan statistical area

(SMSA) in which the supermarkets are located = $5,500

A (in dollars) = Monthly advertising expenditures = $10,000

M = Number of microwave ovens sold in the SMSA in which the supermarkets are located = 5,000

QD = - 5,200 - (42 x 500) + (20 x 600) + (5.2 x 5,500) + (0.2 x 10,000) + (0.25 x 5,000)

QD = - 5,200 - 21,000 + 12,000 + 28,600 + 2,000 + 1,250 = 17,650

Compute the elasticities for each independent variable.Note:Write down all of your calculations

Price Elasticity = (QD/P) x (P/QD) = - 42 x (500/17,650) = - 1.19

Competitor Price Elasticity = (QD/PX) x (PX/QD) = 20 x (600/17,650) = 0.68

Income Elasticity = (QD/Y) x (Y/QD) = 5.2 x (5,500/17,650) = 1.59

Advertising Elasticity = (QD/A) x (A/QD) = 0.2 x (10,000/17,650) = 0.11

Microwave Ovens Sold Elasticity = (QD/M) x (M/QD) = 0.25 x (5,000/17,650) = 0.07

Determine the implications for each of the computed elasticities for the business in terms of short-term and long-term pricing strategies. Provide a rationale in which you cite your results.

Price elasticity > 1 means that it is elastic, this indicates that any changes to the price will have an impact on demand.

Competitor price elasticity is < 1 so this is inelastic, changes to competitor price will have a minor impact on demand.

Income elasticity is > 1, this indicates elastic so any changes to income will have an impact on demand.

Advertising elasticity is < 1, this is indicates inelastic and will have a very minimal impact on demand if any changes were to occur.

Microwave oven sales elasticity is < 1 and will have a very minimal impact on demand.

Recommend whether you believe that this firm should or should not cut its price to increase its market share. Provide support for your recommendation.

The firm should cut prices to increase market share, since the price is elastic there will be a major impact on the demand, in this case the impact will be an increase in sales due to the decreasing cost that inherently will create more of a demand. Cutting prices in many situations can increase market share by allowing consumers that would not have previously purchased the product due to price to have the means to obtain the product.

Assume that all the factors affecting demand in this model remain the same, but that the price has changed. Further assume that the price changes are 100, 200, 300, 400, 500, 600 cents.

Significant factors that could cause changes in the supply and demand for low-calorie, microwavable frozen foods are: competitor pricing, changes to consumer income, changes in culture such as diets, amount of competitors in the market, changes in the quality of frozen products, changes in resource provider pricing, resource availability, product availability, and material expenses.

5. Crucial factors that could cause rightward shift of the demand curve are increased income, reduced prices of complimentary goods, and increased pricing of substitutes. Factors that would cause a leftward shift of the demand curve are negative impacts to consumer income, increased prices of complimentary products such as the microwaves themselves, and a decrease in the pricing of product substitutes. Crucial factors that would cause a rightward shift of the supply curve are a change in government regulations with a positive impact on processes, a change in the ease of use of the product, or a decrease in raw material or manufacturing costs. Factors that could cause a leftward shift in the supply curve are more strict government regulations and increased pricing of raw materials or manufacturing.